Second Circuit affirms that Internet streaming is not cable broadcasting

In 2010, ivi launched a television streaming service that provided subscribers access to television stations. The streaming service provided a national footprint for television access and harkened a potentially new chapter for TV distribution. As the court noted, “within five months of its launch,
ivi had offered more than 4,000 of plaintiffs’ copyrighted television programs to its subscribers.”

In WPIX v. ivi, the Second Circuit held that the new chapter must be written by Congress.

ivi had claimed the right to stream the television content pursuant to section 111 of the Copyright Act that allows cable companies to rebroadcast television signals in their local area upon payment of a compulsory or statutory fee. ivi took the position that it met the definition of cable system so that it could opt into the compulsory payment system.

Based on the statute and congressional hearings, the regulations provide the following definition for a cable system:

A cable system is a facility, located in any State, Territory, Trust Territory, or Possession, that in whole or in part receives signals transmitted or programs broadcast by one or more television broadcast stations licensed by the Federal Communications Commission, and makes secondary transmissions of such signals or programs by wires, cables, microwave, or other communications channels to subscribing members of the public who pay for such service. A system that meets this definition is considered a “cable system” for copyright purposes, even if the FCC excludes it from being considered a “cable system” because of the number or nature of its subscribers or the nature of its secondary transmissions.

The Second Circuit agreed that the language was ambiguous, so it applied the Chevron test to determine whether Congress was clear, and if not, was the agency regulation correct.

If the intent of Congress is clear, that is the end of the matter; courts must give effect to the unambiguously expressed intent of Congress.  If we determine that Congress has not directly addressed the precise question at issue, we proceed to Chevron step two, which instructs us to defer to an agency’s interpretation of the statute, so long as it is reasonable. [WPIX v. ivi, quoting Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467, 842-43 U.S. 837 (1984) (other quotations omitted).]

The court had a difficult time believing ivi had a facility located in a particular state as required or that the Internet was a “facility” as required under the statute, but more importantly it found that the language was not meant to be broadly construed. Despite case law holding that satellite transmissions were within the ambit of section 111, Congress disagreed and instead added section 119 to specifically address satellite retransmissions. Congress also added the work “microwave” by amendment rather than relying on a more general reading of the statute and regulation.

Against this backdrop, the legislative history strongly suggested that Internet broadcasting was not an included subcategory under the “other communications channels.” Had Congress intended Internet broadcasting it had many opportunities to add the language.  Under the second part of the Chevron test, the Copyright Office uniformly stated in both regulation and congressional testimony that Internet broadcasting was not subject to the statutory provisions.

Although the case remains at the preliminary injunction stage, the unequivocal position of the Second Circuit would make future success for ivi very unlikely.

Undoubtedly the technology is rapidly shifting and the time is coming for Apple, Google, Microsoft and other Internet/Mobile companies to rewrite the social contract between audiences and broadcasters, but that revision will not be based on existing statutory licensing schemes. Instead it will require either new, directly negotiated distribution agreements – or more likely triggered by creation of high quality content that originates on the Internet/Mobile platforms. If the “broadcasters” are “streamcasters” then the new model will evolve quickly. Until then cable will still have the upper hand.

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FCC v. Fox: Regulations violated Due Process so still no decision on First Amendment review of Fleeting Expletives and Indecency Review

In FCC v. Fox Television Stations, Inc., 556 U. S. 502, 529 (2009) (Fox I), the Court held that the Federal Communication Commission’s decision to modify its indecency enforcement regime to regulate so-called fleeting expletives was neither arbitrary nor capricious. The Court then declined to address the constitutionality of the policy, however, because the United States Court of Appeals for the Second Circuit had yet to do so. On remand, the Court of Appeals found the policy was vague and, as a result, unconstitutional. 613 F. 3d 317 (2010).

Taking up the issue, the Supreme Court again punted, this time finding a lack of notice to the broadcasters rising to the level of a Due Process violation. The Court unanimously found “[t]he Commission failed to give Fox or ABC fair notice prior to the broadcasts in question that fleeting expletives and momentary nudity could be found actionably indecent.”

The case arose out of appeals in two lower court decisions.

First, in the 2002 Billboard Music Awards, broadcast by respondent Fox Television Stations, Inc., the singer Cher exclaimed during an unscripted acceptance speech: “I’ve also had my critics for the last 40 years saying that I was on my way out every year. Right. So f*** ‘em.” Second, Fox broadcast the Billboard Music Awards again in 2003. There, a person named Nicole Richie made the following unscripted remark while presenting an award: “Have you ever tried to get cow s*** out of a Prada purse? It’s not so f***ing simple.” The third incident involved an episode of NYPD Blue, a regular television show broadcast by respondent ABC Television Network. The episode broadcast on February 25, 2003, showed the nude buttocks of an adult female character for approximately seven seconds and for a moment the side of her breast. During the scene, in which the character was preparing to take a shower, a child portraying her boyfriend’s son entered the bathroom. A moment of awkwardness followed.

The FCC found Fox responsible for the fleeting expletives but did not fine the broadcaster, essentially putting the industry on notice of the future position of the Commission. In FCC v. ABC, Inc. the FCC fined ABC and related affiliates $1.24 million dollars but the fine was reversed on appeal.

The Court found the policies unenforceable because there was not adequate notice to the broadcasters regarding the fleeting expletives and neither notice nor consistency with regard to the amount of time erotic images could be broadcast before they became indecent. (All these erotic cases presumably dealing with buttocks. Full frontal nudity in Schindler’s List depicting the horrors of concentration camps were appropriately not included under the regulations.) The FCC has failed to give broadcasters enough guidance on what constitutes inappropriate content, so the application of the regulations violated Due Process.[1]

What the Court did not do was address the FCC policies on indecency. In concurrence, Justice Ginsburg states that Pacifica should be overturned, an opinion she may share with Justice Thomas – but he did not join her concurrence, so even that question remains open. (FCC v. Pacifica Foundation, 438 U. S. 72 (1978), upheld fines for broadcasting George Carlin’s “Seven Dirty Words” monologue as consistent with First Amendment jurisprudence on broadcast, at least in part because of the way radio was broadcast in public venues and not necessarily with the ability of the listener to control what was being played.)

Despite the tremendous confusion created by the lack of clarity involving the interpretation of the FCC regulations, the litigation has provided no guidance or coherence to FCC policy. There is no relevant FCC regulation for YouTube or other online streams of content, so the separation of over-the-air broadcast has little conceptual rationality. But even more importantly, the Court’s refusal to address the core questions leaves both the FCC and the broadcast industry in a quandary.


[1] The Court noted that “[a]lthough the Commission has had the authority to regulate indecent broadcasts under [47 U. S. C.] §1464 since 1948 (and its predecessor commission, the Federal Radio Commission, since 1927), it did not begin to enforce §1464 until the 1970’s.” The regulatory authority came from 47 CFR §73.3999 (2010) (Commission regulation prohibiting the broadcast of any obscene material or any indecent material between 6 a.m. and 10 p.m.). This may suggest that the Court does not deem the regulations necessary, but if that is the case, the opinion is silent on the issue.